As any Seedsman who has ever had a claim will confirm, claims will always be from an unforeseen event in spite of taking all prudent precautions.  Although all efforts are made to maximise quality control, Seedsmen are susceptible to legal action arising out of the supply of seed that is not of the quality or variety specified in the sale contract.  Sometimes the Seedsman is an innocent party but still has to defend the action which can prove very costly without insurance.

If the seed caused harm to another’s property or injured somebody, that would be covered by Products Liability Insurance.  If the seed sold is found to be defective early enough, it can be replaced by the Seedsman as guaranteed under the standard warranty clause on the invoice.  However, we are not concerning ourselves here with Products Liability as such, or the Replacement Cost of seed, but with the Liability of the Seedsman arising from the sale of defective seed which can, for example, be the loss of the customer’s entire harvest.

There are various activities in the seed trade in which Seedsmen are involved, such as selling seed, packing and/or distributing seed, processing and treating seed, or growing seed under contract.  The following items will illustrate the types of claims which arise from these activities as defined by the five insuring clauses of the policy:

1. "For failure of Seed sold by the Insured to conform to the variety or quality specified or to be suitable for the purpose specified by reason of any negligent act, error or omission of the Insured or its employees in the conduct of the Insured’s business."
   The wrong rice variety was supplied by an Insured, resulting in a claim for the difference between the value of the crop that was produced and the crop that should have been produced.
   A grower maintained that the Insured’s salesman made representations concerning resistance of a sorghum variety to a soil borne fungus which damaged his crop.
   Failure to test seed resulted in onions being of poor quality (double headed), and unsuitable for the claimant’s supermarket customer who had to buy from others.  This caused a particularly large claim against the Insured.
   The wrong variety of tomato seed was supplied to a claimant who needed plum tomatoes for canning, not the round tomato seed which the Insured supplied.
    

2. "For failure of Seed sold by the Insured to conform to the variety specified by the Insured if purchased by the Insured in compliance with applicable Federal and State Seed laws, rules and regulations or from a member in good standing of a recognized Seed growers’ association upon affidavit of the member that the Seed is of the specified variety and was grown by him, or certified by appropriate governmental authority."
   The Insured distributed seed which should have been re-tested within 5 months of sale, and it was alleged that had the tests been done correctly such poorly germinating seed would not have been sold to the claimant.
   The Insured’s clients needed to replant seeds stricken by drought which the Insured had produced and distributed.  The Insured rushed to source additional seeds so the clients could replant in time, but with time short failed to test them.  Although they were from a reputable source they were not a suitable variety and the Insured had to face a number of claims from disgruntled growers.

3. "For failure of Seed sold by the Insured to conform to the variety and quality specified when sold by the Insured in unopened packages received by the Insured from a supplier who is a member in good standing of a recognised Seed dealers’ association."
   The Insured distributed the wrong variety of bean seeds supplied by a Seedsman on the USA West Coast for production on the East Coast.  The West Coast seed supplier had financial difficulties and could not respond to the claim which then fell to the Insured.

4. "By reason of any negligent act, error or omission of the Insured or its employees arising out of the processing of Seed by the Insured for or on behalf of others where no sale of Seed is made."
   The Insured was unaware of a hopper dribbling a different variety of grain into the bags.  A claim was made for the contamination of seed with this different variety.
   The Insured allowed the pelleting of seeds to be too big resulting in poor distribution by the seed drill, and an unusually thin crop.  The grower claimed for loss of harvest.
    

5. "By reason of the Insured’s contracting with others to grow Seed for the Insured, or from the Insured’s contracting to grow Seed for others, or from the Insured’s sale of any Seed so grown."
   The Insured had sent seeds abroad for multiplication.  The seeds were returned, but they were mislabelled and the mistake was not picked up by the Insured who was subsequently sued by the grower.  In this case the Insured was not able to subrogate from the overseas Seedsmen.

Those Seedsmen involved in importing and exporting seeds should be especially wary of their liabilities which involve parties in other countries.  These can be very costly to defend, or to pursue a recovery action.  Having a Seedsmens Professional Liability policy is one way to alleviate these concerns as the Insureds will benefit from Underwriters’ experience of handling claims around the globe.

Underwriters at Lloyd’s, London are interested in insuring any and all of these activities as well as related ones, such as the growing and selling of seedlings, or seed laboratory work. 

Underwriters take into consideration all aspects of the seed business to rate each risk individually.  These factors include the nature of the specific crops involved, be they field or vegetable or another crop, the applicable sales, the actual activities and the claims record.  However if a group or association of Seedsmen wanted to purchase similar coverage Underwriters would consider offering a group scheme giving preferential terms to the individual members.

Rattner Mackenzie Ltd. are the London Brokers for the Lloyd’s Seedsmens’ Insurance Facility which has been arranged in association with the International Seed Trade Federation (ISF), and can be contacted through your usual insurance agent.

Richard Symes can be reached at rsymes@rmluk.com

May 2007